AT&T’s hurry to end unlimited wireless data plans for its customers, many of which are using popular Apple iPhone and iPad devices, signals AT&T’s overburdened network can no longer handle customer demand.  With the threat of even higher data usage from today’s release of the next generation iPhone, which will highlight bandwidth-intensive video conferencing and streaming, AT&T put the brakes on before new customers even activate their new phone.

With a penalization program in place, AT&T is sending a message to customers contemplating owning the newest generation of smartphones that its network is in no position to actually provide service to those devices, particularly bandwidth-heavy video streaming.

Customers who dare use these video streaming services face the prospect of paying an overlimit fee up to $15 for just 200 megabytes of data.  That’s a compelling reason to think twice about every high bandwidth application. And that may be exactly the point for a network that suffers from congestion problems in several major American cities.

AT&T has consistently ranked at the bottom of consumer surveys done by credible organizations like Consumer Reports, typically because of network capacity issues.  Yet the carrier also charges, on average, the highest out-the-door price among the four major carriers — an average of $134 a month for a two-phone plan with a data package.  That’s $20 higher than either T-Mobile or Sprint, eight dollars more than Verizon Wireless.

Ranked rock-bottom for voice quality, downright lousy for customer service, and only average for its other services, AT&T has simply not kept up.  Yet AT&T raked in more than 13 billion dollars in profits in wireless last year.  The New York Times reports AT&T has at least 33 million smartphone customers, many committed to AT&T’s required $30 data plan.  That represents more than $900 million dollars per month in revenue — $10.8 billion dollars annually, and that’s for data services alone.

Yet the percentage of the company’s investments committed to expanding its network, measured under AT&T’s 2009 annual financial report, has not kept up with its enormous iPhone customer base, on AT&T’s network since 2007.

Source: AT&T's 2009 Annual Report -- AT&T's capital investments in its network and service don't keep up with the enormous increase in its Apple iPhone customer base introduced to AT&T service. Last year showed a dramatic reduction in investment when compared with 2008. AT&T is not exactly plowing all of its wireless profits back into its wireless business.

According to TownHall Investment Research, between January 2006 and September 2009, AT&T spent about $21.6 billion, or $308 per subscriber, on its wireless network. During that same period, Verizon Wireless spent about $25.4 billion, or nearly $353 per subscriber.  Verizon has outspent AT&T each of the past three years on service upgrades without the revenue benefits a stampede of iPhone-owning customers brings.  That gap has now grown into a nearly $4 billion dollars difference between the two providers in infrastructure upgrades.

“This is the story of a wireless carrier that is determined not to invest enough to meet the demand of users, but has decided to manage its network as a scarce resource,” says Chris Riley, policy counsel for Free Press. “This is what Wall Street loves: Reduce your expenditures and increase your revenues.”

In a barely competitive wireless marketplace, AT&T can afford to force customers to pay dramatically higher data costs in the months and years ahead, especially for iPhone customers who must use AT&T if they want a subsidized phone.  Even if a customer leaves, AT&T will earn up to $325 in cancellation penalties.

That iPhone exclusivity agreement with Apple has been an unlimited goldmine for AT&T. AT&T’s wireless business drives AT&T’s overall profitability, generating 57 percent of its operating income according to Gerard Hallaren, director of research at TownHall.

Time Warner Cable CEO Glenn Britt told Wall Street the company is backing AT&T’s decision to cease unlimited access to its wireless data services.

“In most businesses when usage goes up, that’s a good thing because people pay more,” Glenn Britt, Time Warner Cable’s chief executive officer, said at a Sanford C. Bernstein Wall Street investor conference Friday in New York. “It’s going to get the industry better aligned with consumer behavior.”

But Britt also said AT&T’s decision was “more sensible than when we did it,” referring to the company’s April 2009 aborted experiment to charge customers up to three times as much for broadband service with a consumption billing scheme that got a hostile response from consumers.

Britt was speaking about the network capacity constraints that wireless data networks have that do not compare with the much wider pipeline available to wired provides like Time Warner Cable.  Britt cited AT&T’s still-exclusive iPhone as being the single most significant factor in AT&T’s decision.

Britt told Business Week that “at the time” consumption “pricing was needed to maintain the expense and expansion of the network.”

But consumer advocates suggested the company targeted its overcharging experiment in cities where customers didn’t have strong competitive alternatives.  That was particularly the case in Rochester, N.Y. and Greensboro, N.C., where alternative broadband meant significantly slower telephone company DSL service.  In the case of Rochester, that service included a monthly 5GB usage allowance in Frontier Communications’ Acceptable Use Policy.

Without equivalent competing alternatives, broadband consumers would be trapped in a broadband backwater with significantly worse service than neighboring cities.

Despite Britt’s acknowledgment that his company backed off because of strong consumer opposition, he’s still willing to talk about bringing the overcharging scheme back, telling Business Week, “Exactly how it works and what the PR around it will be is something we can talk about.”

[Note: We will have some audio up soon. — Editor]

Phillip Dampier

S1209 would have sailed through the North Carolina Senate 39-5 this afternoon had it not been for Sen. Joe Sam Queen who objected to the third reading of the bill.  Senator David Rouzer (R-Johnston, Wayne) also changed his vote from “no” to “yes” which would have ultimately left the count at 40 for and 4 against.  After that, the Senate adjourned and will take up the bill once again on Monday.  What a job well done… for the cable and phone companies.

Brian Bowman reports that none of the Wake County senators opposed the bill or asked that the moratorium be removed.

Out of the entire North Carolina Senate, there are just four good guys?:

Senator Joe Sam Queen (Haywood, Yancy, Avery, Madison, McDowell, Mitchell) [email protected]
Senator Steve Goss (D-Alexander, Ashe, Watauga, Wilkes) [email protected]
Senator James Forrester (R-Gaston, Iredell, Lincoln) [email protected]
Senator John Snow (D-Cherokee, Clay, Graham, Haywood, Jackson, Macon, Swain, Transylvania) [email protected]

Be sure to send all four of these folks your enormous thanks for doing the right thing.  Apparently that is becoming more and more difficult these days.

For those who forgot why this fight matters, here’s a reminder.  Watch it.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Martha Abraham, Mars Hill NC.mp4[/flv]

The people in Mars Hill, N.C. cannot afford to forget.

Now let’s talk reality for a moment.  I’ve been involved in legislative battles on issues regarding telecommunications policy all the way back to the late 1980s when I was fighting for home satellite dish-owner rights.  Back then it was a struggle against big cable, too.  It took several tries, but we eventually won that one.  Along the way, a lot of the same legislative trickery involved in S1209 reminded me of similar experiences back then.  We shouldn’t make the same mistake twice.  Let’s take a look:

The revised S1209 establishes a subcommittee to study municipal broadband funding issues while buying the industry a one year reprieve from any other cities or town going their own way.  The members on this fact-finding endeavor are specifically defined:

• A cable service provider.
• A wireless telecommunications service provider.
• A local exchange provider that is not a wireless telecommunications service provider.
• A local exchange provider that is a wireless telecommunications service provider.
• A city that operates a cable system and an electric power system as a public enterprise.
• A city that operates a cable system as a public enterprise and does not operate an electric power system as a public enterprise.
• A city that is a member of a joint agency established under G.S. 160A-462 for the operation of a cable system as a public enterprise.
• The North Carolina League of Municipalities.

Now, can anyone reading tell me who is -not- on the list?  Have you guessed?

-You- are missing from this list!

Everyone else is in the back room — cable and phone companies, cities, and a lobbying group representing cities.  But not one North Carolina consumer who lives with broadband challenges day in and day out has a place at that table.  What do they know anyway?

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Brooks Townes Weaverville NC.mp4[/flv]

Brooks Townes in Weaverville doesn’t have a seat at the table, either.

How ironic that everyone holding a seat claims their interests coincide with ordinary citizens like you and I.  After all, we’re supposed to be what this fight is all about.  Sometimes, our interests will meet.  Other times, especially when it comes to legislative strategies, they might not.

An Uncomfortable Revelation Caught On An Open Mike

Thanks to WUNC’s Laura Leslie, you can listen yourself as Senator Clodfelter, not realizing his mike was on, tells Senator Blue, “Now I’ll tell you that the … what I call the crazies who circulate around this issue are not going to like this [S1209 revision with a moratorium], but the municipalities are all on board. They negotiated it, they negotiated it so it’s not possible….” Blue asks Clodfelter how long he’s been talking with the groups representing municipalities. Clodfelter’s response: “We’ve been meeting daily — twice daily, so they’re all on board with this precise text.” The recording ends with Clodfelter presumably tapping his mike. Is this thing on? You bet it is. (June 2, 2010) (50 seconds)
You must remain on this page to hear the clip, or you can download the clip and listen later.

We already know what Senator Clodfelter feels about the people who are appalled at yet another embarrassing year of legislators falling all over themselves to do big cable and phone companies another favor.  In his mind, we’re the “crazies” — the indignant citizens fed up with the time, money, and effort not spent building 21st century broadband networks, but instead devising strategies to prevent building them.

Corning has a plant in North Carolina that manufacturers endless miles of fiber optic cable that 40 members of the North Carolina Legislature just said they don’t need.  Send it somewhere else.

Those 40 senators just told citizens — who are still using dial-up Internet access in the Appalachians, or who can’t afford the asking price for service in Spring Creek, or who only get excuses from AT&T why certain homes in Alamance County can have broadband, but they cannot — they really don’t care.  What AT&T, Time Warner Cable, and Embarq wants is much more important.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Layten Davis Spring Creek NC.mp4[/flv]

…More important than the needs of folks like those in Spring Creek.

So while they propose to hold a debate over the merits of the free market vs. community’s doing-for-themselves when the free market fails them, countless thousands of North Carolina’s residents go without or are still hearing modem tones as they connect at speeds dozens of times slower than everyone else.

With a legislature hellbent on stalling or stopping projects that ameliorate this serious problem, no wonder North Carolina’s broadband rankings are falling fast.  In 2007, the Census Bureau ranked North Carolina 35th in broadband adoption.  A year later, the state was down to 41st.  At least you can be proud you’re not West Virginia, right?

But then again, there are eight more positions to drop, so there is still room to make things even worse.

Now I ask myself, what could have possibly happened to deliver 40 votes into the hands of big cable and phone company interests.

Could it have been the time honored trick of dividing and conquering the opposition?  For cities who want to deliver service, the threat of “either/or” seemed particularly effective.  Either take our one year moratorium -or- face the ludicrous original legislation that required a community-wide referendum if Mrs. Nickels over on Fairfax Drive needs a new cable installed at her home to get a better picture.  Either way, because certain folks didn’t say no way to either choice, it’s a victory party for Time Warner Cable, with no need to BYOB — they’ll provide it themselves.  Besides, say the bill’s supporters, we’re offering a chance to hear your voice and views on our stall-tactic fact-finding subcommittee.  Senator Clodfelter even thanks you for being reasonable and adult about all this.

AT&T thanks you as well.

Just keep those “crazies” out of the room.

Cable and phone companies get seats, so they can continue to deliver their talking points that don’t actually deliver broadband to any underserved area of North Carolina. Haven’t they said enough already?  As Senator Queen asked, where is the broadband service for my communities?

In the end, the fact finding mission (cough) will deliver a watered-down report that will find its way into the nearest recycling bin.  The cities’ strong views on municipal broadband will be diluted because they’ll have four competing voices from private industry saying the exact opposite.  Besides, after yesterday’s performance in the Senate Finance Committee, does anyone really believe members like Senator Hoyle care what the subcommittee will have to say?  He can just make it up as he goes along, just as he did when supposedly quoting the mayor of Salisbury.

After all the years spent watching negotiations over legislation, allow me to share this one piece of advice — collaborate and compromise with interests that seek to bury you at your own risk.  Big money interests will call you every name in the book for standing and fighting for your principles (and a few legislators too), but if you make it known it’s time for the other side to start compromising — by actually delivering service and charging a reasonable price for it, there wouldn’t have been a need to engage in this battle in the first place.

That’s why this “crazy” website didn’t back down when Time Warner Cable brought its “new and improved” Internet Overcharging scheme to the table after consumers rebelled against the original plan.  The cable company promised a listening tour, to take advice from reasonable consumers, and to modify its plans accordingly.  Some folks played the game on their field — debating numbers back and forth about what an appropriate amount of rape and pillaging of our wallets was tolerable.  Time Warner changed a few numbers and blessed us with a counteroffer that would have only tripled broadband prices for the same level of service.  Couldn’t we be reasonable and take their offer?

We said no and stood by it, even if it meant going down with a fight.  By not backing down, we won the battle knowing full well the war wasn’t actually over yet.  But you can’t win a battle, much less a war, if you surrender and refuse to fight.

In the end, we were right and they were wrong.  We even proved they were never really interested in listening in the first place.

The correct way forward is to remain 100 percent committed to opposing S1209, so long as it stalls, bans, slows, or sets onerous conditions on providing broadband relief.  That means calling every senator between now and Monday and then doing the same in the House.

The three words you need to remember are real simple:

Kill this bill.

If you are spending time negotiating over who gets to sit in what chair on the subcommittee, you are not paying attention.

Kill this bill.

If you are trying to split the difference over how long the moratorium is going to last, you do not understand.

Kill this bill.

If you are trying to extract some extra concessions to reduce the rape and pillaging of your citizens, stand up, take a deep breath, go outside, and then tell the first person you see to call their representatives and tell them to:

Kill this bill.

If you are a consumer, you’re probably already upset.  In a polite, persuasive, and persistent way, tell your elected officials you understand S1209 has been modified thanks to a compromise, but nobody bothered to compromise with you.  You aren’t interested in this bill in any form, and you know that legislator is going to do the right thing and vote no to:

Kill this bill.

If they vote yes, all they’ve managed to kill is your faith in them as your elected representative.  That’s something that can be taken care of at the next election.

Maybe people like me are crazy to dare to presume that our elected officials work first and foremost for “we the people” and not for the phone and cable company.  Maybe it’s nuts to spend so much time and energy fighting legislation that is so obviously written by and for the industry that cuts a check to the first representative willing to put their name on it and introduce it.  We’ve seen the merits of those who tried the same thing last year.  Only one of them is no longer with the state legislature, brought down on ethics charges.  How surprising.  This year’s fight is lead by a retiring senator who will never endure the satisfaction voters might get disconnecting him from the legislature for selling them down Telecom River.  That is not too surprising either.

Pelosi

House Speaker Nancy Pelosi (D-California) is not impressed with the telecom industry effort to oppose Net Neutrality and broadband policy reform.  Pelosi was referring to two talking-point-infested letters sent to FCC Chairman Julius Genachowski opposing Commission efforts to restore regulatory oversight of the broadband industry lost in a recent court decision.

Speaking for the Democratic majority, Pelosi told bloggers the effort was destined to fail unless Democrats suddenly develop a bipartisan streak, long absent in the House, to sign on Rep. Cliff Stearns’ (R-Florida) anti-oversight bill, something she considers unlikely.

“I don’t know how many options they have unless they choose to work with Republicans, but it’s not going to be a Democratic initiative,” she told bloggers on the conference call.  She added:

“Part of the innovation agenda I advocated for when I became Leader was universal broadband. We had hoped to get it done within five years. We just got the bill passed three years ago under President Bush, but we had no funding. Now we want to have the resources to take us to that place so we don’t have a disparity between urban and rural populations. Reclassification, net neutrality, universal access for every American, these are priorities for us. And we see it not in isolation but as part of a new prosperity, as a job creator, to make America healthier, smarter and an international leader.”

Firedoglake reports pro-consumer Net Neutrality advocates have a letter of their own thanks to Rep. Jay Inslee (D-Washington):

The PCCC has a petition to sign in support of Inslee’s letter, as well as a tool to contact your Representative in the House to tell them to get on board. Today, Speaker Pelosi spoke about the need to educate Representatives on why this is so important, so get to it! Pick up the phone and call, and tell your elected official that you want the Internet protected from greedy corporations.

AT&T’s days of unlimited wireless data plans for smartphone customers officially end June 7th when the company launches new wireless data plans that all come with usage caps attached:

• DataPlus $15 a month and limited to 200 megabytes  of data.  If you exceed it, your overlimit penalty is $15, good for an additional 200 megabytes.
• DataPro $25 a month gets you just 2 gigabytes of data.  The overlimit penalty for those exceeding it is $10 which buys an additional 1 gigabyte of usage.

AT&T Smartphone customers will also be able to add tethering under the $25 DataPro plan for an extra $20 per month, with DataPro’s usage allowance applied.

Current AT&T customers can remain on their current unlimited Smartphone data plan indefinitely, even if they change or upgrade phones according to AT&T spokesman Mark Siegel.  That concession probably helps AT&T preserve anticipated demand for next week’s new iPhone launch.  Without it, customer demand could be tempered by the realization a phone upgrade could cost you your $29.99 unlimited usage plan.  If you were considering getting an AT&T phone with unlimited data, you have until June 6th to sign up for service under that plan.  After that date, you’re out of luck indefinitely.

AT&T is promoting the end of unlimited wireless broadband as a benefit to customers, claiming that 98 percent of its Smartphone customers use on average less than 2GB of data per month.  But that represents today’s usage.  AT&T’s decision to eliminate an unlimited option they claim 98 percent of their customers never exceeded would be curious without understanding the next generation of Smartphones will provide dramatic improvements in high bandwidth video streaming that will dramatically start eating into those low usage allowances.  The company’s next generation of faster wireless broadband will also include low limit plans, which makes them untenable as a home broadband replacement for all but the most casual users.

For new iPad customers, the $25 per month 2 GB plan will replace the existing $29.99 unlimited plan. iPad customers will continue to pre-pay for their wireless data plan and no contract is required. Existing iPad customers who have the $29.99 per month unlimited plan can keep that plan or switch to the new $25 per month plan with 2 GB of data.

AT&T offers up the common practice of boasting about how much you can do with a usage-limited account, based on the thousands of e-mails you'll never send, the 500 pictures you'll never take, or the 20 - one minute YouTube clips you'll never watch. Notice they never seem to include figures for streaming multimedia applications like music, movies, and TV shows or playing more bandwidth-intensive games. To do so would only upset customers further.

AT&T says customers can continue to use unlimited amounts of data when they access it over the company’s Wi-Fi network hotspots.

Wall Street is happy with AT&T’s elimination of unlimited plans, sensing higher profits and reduced costs will follow.

“The new plans appear well designed to reduce undue network stresses,” Craig Moffett, an analyst at Sanford C. Bernstein told The Wall Street Journal.

Analyst Philip Cusick at Macquarie Securities also told the Journal AT&T may see lower growth in data revenue in the short term as a result of the new changes, but will gain leverage over the heaviest data users, improving its ability to manage its network and charge for capacity. Tiered plans may also pull more customers into data plans, he said.

But because current customers can choose to remain on the grandfathered unlimited plan, existing heavy data users accused of chewing up AT&T’s wireless network can continue to do so as long as they remain customers.  AT&T will only be capping future customers who sign up on or after June 7th.

For those outraged by AT&T’s decision, fleeing to Verizon Wireless for unlimited data may not be an option for too much longer either.

Verizon Wireless Chief Executive Lowell McAdam indicated in an interview with the Journal last month that he, too, is looking at pricing based on use.

“The old model of one price plan per device is going to fall away,” McAdam told the newspaper, adding that he expects carriers to take an approach that targets a “bucket of megabytes.”

One company that doesn’t plan to end an all-you-can-eat wireless data buffet is Sprint, which now sees its unlimited data plan as a potential marketing asset.

A Sprint spokesperson spoke the words you were already thinking:

“We’re giving customers a better value. With data usage growing, customers don’t want to worry about going over their limits.”

Some customers upset that AT&T only sold an unlimited plan welcomed the lower cost options because they didn’t spend a lot of time using the data features of their phones, but several wondered why the company didn’t simply introduce lower cost options -and- leave the unlimited plan in place for those who wanted it.

Overall, AT&T is getting an earful from angry customers over the announcement — even those who don’t exceed 2GB per month.  They sense greed and overcharging.   A sampling:

If 3% are using data “a lot” now, then in another two years, it’ll be 15% and then 60%. Simply put, this is gouging customers, where pricing is decided by dudes in a board room looking at charts and graphs and sales numbers, figuring out how to gouge people for maximum profit.

Obviously AT&T is killing the unlimited plan to cut down on usage and to raise their profits. I also believe it is heavy handed to eliminate the unlimited access plan. If anything, offer other plans and raise the price of the unlimited plan. It will be interesting to see of the other players follow suit and also kill their unlimited plans (can you say “price fixing”? Sure you can!).

AT&T is always full of good ideas, like that Microcell thing. Hey, we can’t give you good service you paid for, so we are going to ask you for more money for this piece of equipment to supplement the service you are not getting.

Just another greedy ploy to make more money. They are selling air. The charges are ridiculous and this is one industry that should be under government control.

My spouse and I pay half of what AT&T would charge us for excellent Palm smartphones on Sprint. We also get turn-by-turn GPS included–something AT&T AND Verizon both charge extra for. Sprint’s network is top-notch. I can’t fathom why people continue to waste money on Verizon and AT&T.

If you’ve got a smartphone or you tether your computer, you really have no idea how much bandwidth your device is consuming. Even worse (or better if you are the phone company) customers can’t control the bandwidth that their devices consume. How often does your email client check for new messages? Can you even stop your computer from downloading a security update? What about that last application you installed, can you stop it from calling home every time you launch it? Do you even know that it does track and report your usage? That’s a huge difference between phone services and data services. You KNOW when you’ve dialed a number and talked for 10 minutes. You can’t control all the data consuming applications and services on your devices… and trying to bill customers for something that they can’t control the usage or cost must be illegal. Surely someone will address this problem soon. Surely.

[flv width=”576″ height=”344″]http://www.phillipdampier.com/video/CNN ATT Goodbye to unlimited data 6-2-10.flv[/flv]

CNN Money reports on AT&T saying goodbye to unlimited data plans for iPhones and iPads.  (1 minute)